The ‘lean startup’ methodology – where agile approaches are used to speed up the development and release of products and services – is a concept that every CIO needs to understand and embrace.
Venturetec recently arranged bestselling author of The Lean Entrepreneur, Brant Cooper, to discuss his own experience working at startups with an audience at Australian Fintech hub, Stone & Chalk.
He noted that this particular startup was acting like an enterprise and he wasn’t given the opportunity to chat with any of the organisation’s customers to get a feel for what they wanted.
The startup’s initial business results were poor, and Cooper was eventually able to speak to customers who he discovered weren’t using the startup’s latest product. Why? Because the organisation built a product that nobody wanted to use.
It was clear that the startup that everyone expected to be agile was behaving just like a large enterprise.
Cooper explained the concept of what is ‘known and unknown’, the simple genesis of a ‘lean entrepreneur’ that works on a simple principle.
As various parts of your business model become ‘known’, you move into execution mode. Innovation occurs when things are ‘unknown’, when your organisation is in search mode looking for new opportunities and then you start to make a shift from unknown to known.
Then you get big by executing the ‘known.’ This is all about the search for the next new business model. Did you get all that?
Being ‘in the know’ is both your strength and your weakness. Knowing the markets and customers you are targeting helps drive revenue but it also makes you inflexible and unable to adjust.
Lean startup is all about elimination of waste and measuring learning. Often, we don’t really know what value we are creating and don’t really know the customer. And unfortunately, we can’t learn this from surveys.
In this regard, innovation is actually all about embracing uncertainty rather than constantly striving to gain certainty or at least confidence in our plans. So we can struggle with the uncertainty that innovation requires.
Cooper explained that there are ‘three e’s of lean innovation', which are:
- Empathy: This helps us understand the customer’s needs.
- Experimentation: To translate insights into action.
- Evidence: To make decisions based on what we have learnt from customers.
I’m definitely seeing that these are applicable in enterprise IT. Unfortunately we haven’t demonstrated that we have that much empathy and that is just the starting point.
Cooper also explained that there are many examples of startups that have used rapid experiments as a mechanism to learn about real customer needs.
An example is a simple landing page. Create a fairly empty page with not that much content. This is all about testing customer behaviour, not what they say they will do but what they actually do.
Cooper shared examples of startups that were built from such simple and humble beginnings. It wasn’t fancy but this is all about having a hypothesis and then testing it. Focus on the metrics and measure the actual behaviour.
Cooper suggested a simple step-by-step approach to acting like a lean startup.
- Start by having empathy with the customer – to understand the pain points.
- Build a minimal viable product at the hypothesis stage.
- Find a market so people will buy.
- Find a way to scale the enterprise and sell to multiple segments to achieve the necessary scale.
- Develop profitability that also scales with the business.
Should you succeed in these 5 steps, then you may have a viable new startup. However let’s not assume that this is a cookie cutter approach and that introducing innovation into an enterprise is easy.
Enterprises make several common mistakes, Cooper said. These include not ensuring internal resources are dedicated to the task, battling against existing silos and internal fiefdoms, looking for a return on investment, and new initiatives going against current branding and compliance.
There is an overarching need to find like-minded people that are supporters of the change. Identifying these early adopters that ‘get it’ is the key to getting traction in an organisation.
The way forward
About every enterprise is looking to be more innovative and looking for a way forward. But be aware that enterprises have been built with ‘brakes’ and these are inherent in their DNA.
It is impossible to move the needle without radically challenging existing assumptions of how we operate. The way forward is to understand accelerators like lean startups. The approach is to re-engage with the customer and turn upside down what has been considered the norm.
There are lessons in this for every CIO.
David Gee is the former CIO of CUA where he recently completed a core banking transformation. He has more than 18 years' experience as a CIO, and was also previously director at KPMG Consulting. Connect with David on LinkedIn.